Linking the financial statements
I know the setup of financial statements and their general structure (income statement, bal sheet, CF stmt)...
On interviews, linking the statements is important - What resources would you use to solidify specific I-banking accounting skills? - I've heard that accounting textbooks are a good bet, but they're full of so much clutter non-applicable info... please sound off.
http://product.half.ebay.com/Understanding-Financial-Statements_W0QQprZ…
I used this book, its pretty decent since it focuses only on Financial Statements, and analyzing them.
Disclaimer: The post above has been made by someone who is not currently employed in IBD, and has not had an interview yet...
Andrew, for the love of god!
You just got outed in total disgrace exactly because of the fact that you did exactly what you did here about 700 times.
10 people told you to stop doing exactly this, learn from it and maybe you'll have things turn out ok like you want them to.
And during this whole situation, what are you doing?
he asked for something to help link financial statements, get off my nuts.
Disclaimer: The post above has been made by someone who is not currently employed in IBD, and has not had an interview yet...
shoot me a PM. I'll e-mail you a PDF with one bank's training materials (not mine)
hi guys....quick question: how do you go about answering this question [how are the 3 financial statements connected, walk me through it] in a concise manner in an interview?
please don't tell me you're a business major...............
Standard question is something like this:
Income statement lets you know how profitable business was during a specified period. Revenue less expenses. Then you subtract interest and taxes, and you get your Income (I) for that period. Income - dividends paid out is equivalent to Retained Earnings (RE), which is added to Shareholder Equity on the balance sheet.
Statement of cash flows let's you know what the cash flow situation at a company was like (cash flow can differ significantly from income from P/L due to D&A). You use Cash Beginning of Period (BOP) which is taken from the Balance Sheet in the assets of previous period, and from that you start adding/subtracting cash flow from operations, investing, financing (this can be done either through direct method or indirect method). What you get is change of cash position during that period, which when added/subtracted to the previous Cash at the BOP of the balance sheet, yields Cash for the next period's balance sheet.
You can also mention that given two balance sheets from successive periods, you can construct a Cash Flow statement via indirect method.
HTH
thank you.
http://www.khanacademy.org/finance-economics/core-finance/v/balance-she…
He does a great quick video explaining this question
Accounts Payable links in the Financial Statements (Originally Posted: 10/14/2007)
I had a question about Accounts Payable perhaps somebody could shed some light on:
Say Inventory is bought on credit (accounts payable), inventory (assets) goes up, A/P (liabilities) goes up, but then on the cash flow statement won't that be a gain in cash (cash lag as none is paid out) from operating activities which would in turn flow to the cash on the balance sheet as an increase (increase), unbalancing the equation? What is the offset for that increase in cash?
The increase in inventory is a use of cash. The increase in AP is a source of cash. The two offset eachother.
This isn't quite right.
The timing of cash inflows to cash outflows here all depends on the relative days payable (AP) vs. days of inventory. In practice though, no cash is created or used by purchasing inventory on credit. Assuming the inventory does get sold before payables are due, then inventory goes down (by COGS), cash or AR goes up (by sales), and retained earnings (or another SE-related account) goes up (by sales less COGS). In this example, it is possible that cash is generated (assuming the sale is paid for in cash and not credit), but the accounts are still in balance.
I was taking it in the context of how he should answer the quesiton in an interview. No sale was mentioned, so i refrained from making things complicated.
how is the inventory a use of cash? assuming that no sale (no cogs) was made... how would inventory flow thrrough and cancel out the increase in AP?
...perhaps it's because no cash changed hands?
Linking the statements - non cash add back situation (Originally Posted: 03/18/2011)
I'm looking at the 10k for Microsoft and there are 2 non-cash expenses being added back to net income on the cash flow.
Recognition of Unearned Revenue and Deferral of Unearned Revenue.
How should I treat these items if I am linking the statements.
If I put them into deferred revenue won't that will in effect double count those items as I account for deferred revenue when calculating changes in operating assets and liabilities.
I read through the 10k and there is zero reference to these items.
Thanks guys
Deferred and unearned revenue should be cash coming in but not showing up as revenue on your income statement.
As a result, this be will a cash inflow on your CF statement as CF from operations.
This increases your cash on the balance sheet and it balances by increasing your liabilities by the same amount in the deferred & unearned revenue line item under current liabilities.
they have it broken out by long term and short term. on your CF statement under adjustment for working capital, do not include the short term portion and the cash inflow on the balance sheet should be total revenues deferred minus total deferred recognized
solid - thanks for the help guys
n.a.
linking statements (Originally Posted: 04/07/2011)
i was trying to practice linking statements by using the income statement and balance sheet to derive the cash flows
using finance yahoo's financials on Cephalon as a practice http://finance.yahoo.com/q/is?s=CEPH+Income+Statement&annual
however i could not get to the same numbers on their CF by messing around the the IS/BS
for example how would you get the depreciation in CF with the other 2?
thanks for the help
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